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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2009

Vol. 14, No. 23 Week of June 07, 2009

Oil Patch Insider

When you’re down, you’re down…; war of words on gas line progress under Gov. Palin

Reeling from low commodity prices, the Canadian petroleum industry got some soothing words from Alberta Premier Ed Stelmach, author of his province’s widely condemned royalty overhaul.

Under the new regime, that took effect Jan. 1, Alberta producers paid the province C$500 million less in the first three months of 2009 than they would have under the old system, he cheerfully told the industry.

“Isn’t it ironic that in all of the articles that have been written by the commentators on the royalty framework, not once was it mentioned that the industry saved about C$500 million in the last quarter of the (2008-09) fiscal year because of the new royalty regime?” he told the Edmonton Journal.

Stelmach said that on his trips to Calgary people “come up and give you a hug on (the royalty) issue. Or they’ll say thanks. Or they may say, well, on this one issue I may disagree with you, but I know the direction you have to take,” he said, in defending his government’s insistence it was entitled to collect a fairer share of natural resource royalties.

For now, that is costing a government that has fallen back into deficit budgets a lot of money it could use for infrastructure spending.

However, Stelmach said the sliding scale of royalties will see the province collect more as oil and natural gas prices rise because the regime doesn’t penalize companies at a time when they’re struggling to make profits, but squeezes them harder when times are good.

Despite the price it is paying, Stelmach said the government is not praying for a return to oil at US$150 a barrel.

What he would prefer is a slow, steady rise, not one that will send Alberta back to a frenzy of expansion and hurt global economic recovery.

“We don’t need $100-a-barrel oil,” he said. “We need just a good price, say an $80 market, something that will be balanced and let the economy catch up.”

—Gary Park

Begich asks for national leadership on gas line

A war of words erupted in early June over how much progress there has been in getting Alaska’s North Slope natural gas to market.

Alaska’s junior senator, Democrat Mark Begich, asked in a June 1 speech to the World Trade Center why dirt wasn’t being turned on the project.

It’s an often-heard question from the Beltway since Congress voted to assist the project with loan guarantees and permitting assistance in late 2004. The impatience of the Lower 48 for Alaska gas has been a frequent item in annual addresses by members of Alaska’s congressional delegation to the Alaska Legislature.

Begich said in remarks prepared for the talk that he joins “a growing chorus both here and in Washington who are frustrated with the lack of progress” on an Alaska gas pipeline project, including the president and his top advisors. Begich said he met with President Barak Obama in the Oval Office and the president raised the issue of progress on the pipeline.

More national attention is warranted, he said.

“Instead of treating it as an Alaska project, I am urging the Obama administration to elevate the Alaska gas line to the national energy agenda,” Begich said.

Gov. Sarah Palin, a Republican, said in a June 3 statement that substantial progress has been made on the project, and noted that since the 2007 passage of the Alaska Gasline Inducement Act the state now has two competing projects, both of which have made significant progress.

“We must believe that you are uninformed about the current situation in Alaska regarding this project,” Revenue Commissioner Pat Galvin and Natural Resources Commissioner Tom Irwin said in a June 3 letter to Begich.

Galvin and Irwin, who are charged under AGIA with moving the state-licensed project forward, said they were “surprised and dismayed” at the senator’s comments.

Galvin and Irwin told Begich that progress is being made every day on the Alaska gas pipeline project, but cautioned that “lead time required to execute the project successfully is measured in years, not days or months.”

The men also said Alaskans appreciate the bipartisan support the project has received, adding “AGIA was designed to protect values critical to the state and national interests by providing for lower tariffs on the pipeline, ensuring expansion opportunities for new gas discoveries, and protecting against basin control.”

As for national discontent with the progress of the project, Galvin and Irwin said they have heard nothing from the president or members of his administration “that reflects frustration with the significant progress that is now occurring.”

—Kristen Nelson






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